Authority and Efficiency: The Labor Market and the Managerial Revolution of the Late Nineteenth Century

¹ See David Montgomery, Workers' Control in America (Cambridge, 1976), pp. 11–15.

² Ibid., pp. 11–12.

³ These works include Stone, Katherine, “The Origin of Job Structures in the Steel Industry,” Review of Radical Political Economics (Summer 1974); and Lazonick, William, “Production Relations, Labor Productivity and the Choice of Technique: British and U.S. Cotton Spinning,” this JOURNAL, 41 (09 1981), “Technological Change and the Control of Work,” Harvard Institute of Economic Research, Discussion Paper No. 821 (April 1981), and “Production Productivity and Development: Theoretical Implications of Some Historical Research,” Harvard Institute of Economic Research, Discussion Paper No. 876 (Jan. 1982).

⁴ Williamson, Oliver, “The Organization of Work,” Journal of Economic Behavior and Organization, 1 (03 1980), p. 32.

⁵ Marx, Karl, Capital, Volume I (New York, 1967), p. 636.

⁶ Davis, Lance et al. , American Economic Growth (New York, 1972), p. 225.

⁷ Ibid., p. 224.

⁸ Edwards, Richard, Contested Terrain (New York, 1979), p. 3.

⁹ Toharia, Luis, “The Division of Labor and the Historical Development of the Internal Labor Market: A Case Study of the McCormick Works of Chicago, 1848–1902” (Ph.D. diss., MIT, 1979), p. 24.

¹⁰ I assume throughout that employers do not combine to depress wages. Most modern studies find monopsony to be unimportant as a feature of labor markets. See for example Bunting, R., Employer Concentration in Local Labor Markers (Chapel Hill, NC., 1962);Landon, J. and Baird, R., “Monopsony in the Market for Public School Teachers,” American Economic Review, 61 (12 1971).

¹¹ Nelson, Daniel, Managers and Workers: Origins of the New Factory System in the United States, 1880–1920 (Madison, 1975), p. 57.

¹² See Lazonick, “Technological Change and the Control of Work.”

¹³ See Freeman, Richard and Medoff, James, “The Two Faces of Unionism,” The Public Interest 57 (1979), as an example.

¹⁴ Montgomery, David and Schatz, Ronald, “Facing Layoffs,” in Montgomery, Workers' Control in America, p. 139.

¹⁵ Matthewson, Stanley B., Restriction of Output Among Unorganized Workers (New York, 1931), p. 61.

¹⁶ Ibid., pp. 61–62.

¹⁷ Ibid., p. 135.

¹⁸ Scitovsky, Tibor, The Joyless Economy (Oxford, 1976), p. 95.

¹⁹ As Mancur Olson shows, the conditions for rational agents being able to achieve a collective benefit are quite strict. See Olson, Mancur, The Logic of Collective Action (Cambridge, Massachusetts, 1965).

²⁰ Chandler, Alfred, The Visible Hand: The Managerial Revolution in American Business (Cambridge, Massachusetts, 1977), p. 123.

²¹ Chandler, The Visible Hand, p. 317.

²² See Leibenstein, Harvey, “Allocative vs. X-Efficiency,” American Econotnic Review, 56 (06 1966), p. 393.

²³ Eleventh Special Report of the Commissioner of Labor, Regulation and Restriction of Output (Washington, D.C., 1904).

²⁴ Lewis, L. E., “Extent of Incentive Pay in Manufacturing,” Monthly Labor Review, 83 (05 1960), pp. 460–63.

²⁵ See Britain, Great, National Board for Prices and Incomes, Report No. 65, Payment by Results Systems (London, 1968).

²⁶ Chandler, The Visible Hand, p. 142.

²⁷ Ibid.

²⁸ Josephson, Matthew, The Robber Barons (New York, 1934), p. 288.

²⁹ Chandler, The Visible Hand, p. 334.

³⁰ See Mitchell, Broadus, The Rise of the Cotton Mills in the South (Baltimore, 1921).

³¹ Heim, Carol, “Structural Transformation and the Demand for New Labor in Advanced Economies: Interwar Britain,” this JOURNAL, 44 (06 1984), points out this phenomenon in Britain in the 1930s. It is also true in recent years. Researchers at the National Institute for Economic and Social Research, investigating recruiting of labor by a large multinational in Britain, found that the firm hired only workers with no previous industrial experience for production-line tasks.

³² Peter Temin suggests that the early nineteenth-century American economy possessed much greater price flexibility. See Temin, “General Equilibrium Models in Economic History,” this JOURNAL, 31 (03 1971), 58–76, and The Jacksonian Economy (New York, 1969). In his famous Economica article Phillips argues that the relationship between wage changes and unemployment in Great Britain is stable from 1861 to 1957. This author's examination of the data underlying Phillips's demonstration finds instead greater wage inflexibility in the twentieth century in Britain. See “The Phillips' Curve Revisited” (mimeo).

³³ Williamson, “The Organization of Work,” p. 33.

³⁴ For a history of the British cooperative movement, see Boggis, Fred, “Workers's Cooperatives: A Vital Experiment,” in Participation in Industry, ed. Balfour, Campbell (Totowa, New Jersey, 1973).

³⁵ Bowles, Samuel and Gintis, Herbert, Schooling in Capitalist America (New York, 1976), p. 62.

³⁶ See Marglin, Stephen A., “Knowledge and Power,” Harvard Institute of Economic Research, Discussion Paper 901 (1982), for the complete argument.

³⁷ Boggis, “Workers' Cooperatives,” pp. 35–38.

³⁸ Potter, Beatrice, The Co-operative Movement in Great Britain (London, 1891), p. 153.

³⁹ Jones, Benjamin, Co-operative Production (Oxford, 1894), p. 780; and Boggis, “Workers' Cooperatives,” pp. 35–38.

⁴⁰ Jones, Co-operative Production, p. 780.

⁴¹ Oakeshott, Robert, The Case for Workers' Co-ops (London, 1978), p. 64.

⁴² Ibid.

⁴³ Potter, The Co-operative Movement, p. 123.

⁴⁴ Jones, Co-operative Production, p. 288.

⁴⁵ Ibid.

⁴⁶ Potter, The Co-operative Movement, p. 215.

⁴⁷ Oakeshott, The Case for Workers' Co-ops, pp. 132–34.

⁴⁸ New York Times, Apr. 4, 1984.

⁴⁹ See Williamson, Oliver E., Markets and Hierarchies (New York, 1975), for the most complete presentation of this approach.

⁵⁰ Williamson, Oliver E., “The Modern Corporation as an Efficiency Instrument,” in Government Controls and the Free Market, ed. Pejovich, S. (College Station, Texas, 1975), p. 172.

⁵¹ Report of the Commissioner of Labor, p. 18.

⁵² See for example Davison, J. P., Florence, P. S., Gray, B., and Ross, N., Productivity and Economic Incentives (London, 1958).

⁵³ Orcutt, H. F. L. et al. , “Machine Shop Management in Europe and America, Part III,” Engineering Magazine (03 1898), p. 927.

⁵⁴ Ibid.

⁵⁵ Maxim, Hiram, “The Effects of Trade Unionism upon Skilled Mechanics,” Engineering Magazine (Nov. 1897).

⁵⁶ Maxim, Hiram, “National Differences in Labor-Handling Methods,” Engineering Magazine (Dec. 1897), p. 370.

⁵⁷ Robertson, A. J., “The Decline of the Scottish Cotton Industry, 1860–1914,” Business History, 12 (07 1970), p. 121.

⁵⁸ The lack of social distinctions between managers and employers may explain why cooperatives of professionals can be very successful. The London Symphony Orchestra has been a successful workers' cooperative since 1904. The members elect the conductor and the directors, and participate in a production process which is complex and requires a high degree of cooperation between participants. The possibilities for opportunistic behavior and for collective restrictions by workers are as great as in any enterprise.